Question

World Petroleum holds huge reserves of oil assets. Assume that at the end of 2018, World Petroleum's cost of olreserves totaled $21,000,000, representing 3,000,000 barrels of oil Read the requirements Requirement 1. Which method does World Petroleum use to compute depletion? is the method used to compute depletion Requirement 2. Suppose World Petroleum removed and sold 500,000 barrels of oil during 2019. Journalize depletion expense for 2019. Assume no residual value Record debits first, then credits Select the explanation on the last line of the journal entry table) Accounts and Explanation Debit Credit Choose from any list or enter any number in the input fields and then continue to the next question

Answer 1

Answer-1-The method World petroleum would use to compute depletion:-

Units of production method is the method to compute depletion.

2-Depletion expenses=Cost of oil reserves /Total expected barrels of oil*Barrels of oil extracted

=21,000,000/3,000,000*500,000

=$7*500,000

=$3,500,000

The journal entry to record depletion:-

Date	Account Title and Explanation	Debit ($)	Credit ($)
2019	Depletion expenses-Oil reserves	3,500,000
	Accumulated depletion-Oil reserves		3,500,000
	(To record depletion expenses for the year 2019)

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